Alternative Compensation Plans

ADM, Inc., an electronics manufacturer, uses growth in earnings per share (EPS) as a guideline for evaluating executive performance. ADM executives receive a bonus of $5,000 for every penny increase in EPS for the year. This bonus is paid in addition to fixed salaries ranging from $500,000 to $900,000 annually.
Cygnus Corporation, a computer components manufacturer, also uses EPS as an evaluation tool. Its executives receive a bonus equal to 40% of their salary for the year if the firm’s EPS is in the top third of a list ranking the EPS for Cygnus and its 12 competitors.

In your opinion what is the greatest weaknesses of an incentive plan?

Use a minimum of one outside source in addition to you text and the above scenario to construct your response. Write in complete sentences and use appropriate APA citations as necessary.


Open chat